CEO investment of deferred compensation plans and firm performance

Arbeitspapier

We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm's profitability. By looking at the correlation between the CEO's return on these plans and the firm's stock return, we show that deferred compensation is to a large extent invested in the company equity in good times and divested from it in bad times. The divestment from company equity in bad times arguably re ects CEOs' incentive to \abandon" the firm and to invest in alternative instruments to preserve the value of their deferred compensation plans. This result suggests that the incentive alignment effects of deferred compensation crucially depend on the firm's health status.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 160

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
• Subject: Executive Compensation ; Deferred Compensation ; Corporate Distress

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cambrea, Domenico Rocco ; Colonnello, Stefano ; Curatola, Giuliano ; Fantini, Giulia
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (where): Frankfurt a. M.
• (when): 2019

Further information

• DOI: doi:10.2139/ssrn.2884600
• Handle: http://hdl.handle.net/10419/203305
• Last update: 10.03.2025, 11:46 AM CET